Programmatic media buying is seen as a revolution of digital advertising. With an introduction of automatisation, the routine processes gained speed and efficiency. However, the sphere has faced several challenges as it appeared that a strive for automation begun to hit hard on the pockets of advertisers. With fraudulent impressions and commissions, it’s difficult to predict the financial outcomes of campaigns and their effectiveness.

Meanwhile, blockchain is being actively discussed in the media as an ultimate cure against these troubles. Blockchain technology promises digitization, decentralization, security, and action verification from all chain participants. With every action registered it will be much easier to track down the ad visibility, placement, and commission attributed.

Ad Tech: diagnosing the problems

Just to assess the scale of financial losses -- the ad market participants regularly sacrifice $7.2 billions of ad spend to the click-fraud, bot-traffic, installs hijacking just to name a few problems with fraud.

What does this mean for the market players? This means that everyone involved in the ad purchasing, whether it is a large corporation or a tiny brand, pays for one fake bot click out of five performed. These bot clicks are making invalid traffic that never converts in purchases.

Transparency issues are, first of all, related to the inability to track down the revenue share distributed among chain participants: DSPs, SSPs, DMPs, Ad Networks - they all determine commissions for their services individually.
Thus, setting up an ad campaign on DSP the advertiser only knows the CPM (total cost for thousand impressions). Where, why, and how exactly the sum is allocated is still a thousand-dollar question.

Programmatic is on the stage when it needs openness and visibility like never before. Clear and accessible information on transactions and their history are what can solve the majority of “black box” problems: the fraudulent impressions, financial transparency, and lack of control over inventory where the ad is placed.

How Blockchain will cover the gaps in programmatic

As the most critical issues on the agenda are transparency and ad fraud, the Blockchain appears as a best potential solution for them because it works like an old-school accountant book where every transaction is registered on a decentralized ledger.

If every computer in the world is the part of connected Blockchain network, therefore, each computer/participant can be connected to the same ledger which helps to check each transaction. Each action within the public Blockchain system is approved by all chain participants only then it gets recorded inside the ledger which can never be erased or modified afterwards. What benefits are here for the programmatic buying?

The transparency of the costs and actions the ledger delivers will guarantee that parties will see what is happening during the process of buying and selling media, this should leave no extra room for hidden costs. This will also ensure that algorithmic ad buying processes only impressions viewed by real people so that advertisers get the best from their marketing budgets.

Blockchain ledger is universal storage for any type of information even when we don’t mention transactional data. For instance, advertisers can freely track where their ads are displayed, and get a clear picture on who is viewing their ads. Smart contracts, in their turn, can automate the fulfilment of contractual agreements and execute them only in case conditions are matched.

The chain where all operations are seen, approved, and verified by participants prevents potential speculations with hidden costs and invalid bot traffic. With this level of transparency, it is easy to audit how the ads are delivered which contributes to the trust and accountability between partners.

Current challenges and ways to overcome them

So far blockchain can process up to 2000 transactions per second, while in the programmatic we are usually talking about millions. With this, a lot of modernizations are yet to be done, but luckily today it’s the primary vector of development.

Blockchain network is based on active participants which support the system functioning, roughly speaking, each one creates a part of the ecosystem. If just a year ago an insufficient number of active participants was regarded as an obstacle on the way to the development, today we can see how first robust functioning platforms appear on the scene.

It’s already possible to find market-ready solutions, but in order for the trend to reach the massive effect, the legal framework for technology functioning needs to be developed. Worth to admit, the absence of the legal regulation and the elementary knowledge of technology capabilities still creates a lot of confusion among market participants.

To address these issues, in September 2017 IAB Tech Lab has created the Blockchain working group the aim of which is to facilitate technology integration into the ad sphere quicker. Apart from outlining the best practices and recommendations for building and maintaining ad solutions, the initiative includes a theoretical basis which helps to gain an understanding of the Blockchain role in digital advertising.

It’s not until 2020 that the market can see the real rise of blockchain-based solutions. Only with a developed legal framework, the majority of the projects will turn from beta testing to fully function platforms. Nevertheless, many of them are already there and the brands prepared for fundamental technology changes may have a unique chance to gain competitive market advantages.

The last word

Blockchain-based ad solutions that appear on the scene are going to change the world of media buying in the nearest future. The chain participants will be able to run the ad campaigns in the fraud-free ecosystem, access the history of transactions, audit complicated processes, and achieve total transparency and validity of their advertising campaigns. Will blockchain redefine the sphere so that there will be completely nothing to hide and nothing to fear? Only the future will show, but with such rapid development pace, it gets clear -- big changes are just around the corner.

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Ivan Guzenko

Ivan Guzenko is an ad tech visionary, a blockchain enthusiast, and the CEO and co-founder of the SmartyAds company. Prior to SmartyAds, Ivan held positions at various digital advertising companies helping them to generate sustainable growth. Ivan is also participating in the IAB blockchain working group, as well as actively consulting startups and mature companies on the adoption of the latest digital advertising techniques.

A futurist and a strong believer in the "Robots optimize and hit the targets better than humans" and "0 transactional costs" concepts, Ivan is always ready to get as deep as it takes to the technical understanding of the advertising processes of today and nearest future.